Accountants concerned over inequity

Press, 27 May 1981, Page 29

Accountants concerned over inequity

The Society of Accountants is concerned that the distribution of capital profits by public companies, arising from the sale of assets to subsidiary companies, may no longer be tax-free. Its concern is that the Commissioner of Inland Revenue may, in "effect, change the Department’s approach to this question after having approved tax-free distribution in a number of cases in the past. The society has been told that the Department is reviewing the w'hole matter because of the nature of some transactions.

The Commissioner told the society that the legal considerations involved were complex and until the position became clear the Department could not give any undertaking that dividend's arising under these arrangements would not be subject to tax. The society did not question the Commisioner’s responsibility to apply the provisions of the Income Tax Act properly. "However, the Department has already approved tax free distribution of profits resulting from several transactions of this nature, in-

volving millions of dollars over two or three years,” said the society's president (Mr R. W. Pope). "Now the Commissioner has decided to withhold any further approvals until he clarifies the legal position,” he said. "The potential inequity of such a situation is obvious and is of considerable concern to us.”